Costs & Uncertainties from Subsidized Renewable Energy Sources

Most environmentalists hail the introduction of renewable energy sources citing claims that besides being “cleaner” & that they can contribute to economic growth & job creation. Such assertions tend to ignore economic realities associated with the impact of subsidies & the costs of using renewables.

One problem arises from blending erratic sources of electricity generation (e.g,, most renewables) with those conventional sources (e.g., fossil fuels) that can be continuously available.

A new study from the OECD Nuclear Energy Agency looks at the costs of introducing erratic renewables (like solar & wind) to an electrical grid system based on reliable sources of electricity (e.g., coal, gas & nuclear), aka, dispatchable technologies.

The study considers 6 technologies (nuclear, coal, gas, onshore wind, offshore wind & solar)where dispatchable technologies have system costs of less than $3 per MWh. System costs for renewables are up to $40 per MWh for onshore wind, $45 per MWh for offshore wind and $80 per MWh for solar.

Actual costs for renewables depend upon the country, technology & penetration levels such that system costs are higher when there is greater penetration of renewables.

For their part, erratic renewable sources tend to reduce revenues for the more reliable sources. As such, subsidies for renewables undermine the use of dispatchable technologies & make it unlikely for them to be replaced when they reach their end of life such that there may be less security of electricity supply.

One Response to “Costs & Uncertainties from Subsidized Renewable Energy Sources”

  1. Brent B says:

    I go back to my Air Force Academy story. They spent $18M and 40 acres of land to produce 5% of the Academy’s electrical requirements. The annual savings is $600,000 and the expected lifespan of the solar farm is 30 years. This all occurs in the middle of the worst financial crisis since the Depression. Effectively we paid 30 years of electrical bills upfront and financed them. For what?

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